The Estonian telecommunications company, Eesti Telefon, promised to decrease its tariffs on international calls by 2001 in preparation for future competition. Eesti Telefon will lose its monopoly position on the Estonian telecommunication market in 2001 and will have to compete with international companies which offer much lower rates.

“Presently Eesti Telefon is subsidizing local calls on account of international calls. International and local companies do not approve of this action. The tariff of each service should correspond to its actual price,” said Enno Kiviloo, spokesperson at Eesti Telefon.

Eesti Telefon might cut its tariffs by three times. He also said that monthly subscription fees paid by private persons should be equal to those paid by corporate subscribers, who now pay more for the same services.

“It is the policy of the state to protect private persons who are not able to pay. The market will regulate the price,” said Kiviloo.

If Russia will make reasonable economic choices, the situation there could stabilize this year and growth could resume in 2000. If not, it may get even worse.

This is the conclusion to which Russian economists and Estonian businessmen arrived at their meeting in Tallinn Feb. 17.

This was the first meeting of its kind held between the two countries, but both parties decided to make it a tradition and meet in Russia next year.

“Businessmen have had tight contacts before, but for the economists, it was the first time they came together and learned the general situation of Estonia and Russia. The idea of the round table was to make the economists and businessmen discuss the future of economy,” said Erik Terk, director at the Estonian Institute for Futures Studies.

Jaak Saarniit, director at the Estonian Business Association, said there are many potential products in Russia, but their production needs financing.

“These products, filters for example, are cheaper and of a better quality than Western standards. Russian companies need financing and marketing experience. They contacted Estonian companies and banks for this reason,” said Terk.

Russian delegation also introduced its foreign policy, general macroeconomics situation and financing and also made predictions on the exchange rate and inflation in Russia.

“Though everybody currently seems to be very eager to stress that the economic situation in Russia is extremely difficult, this rhetoric has unfortunately not been matched by political will to face the critical situation and look for real solutions,” reported the specialists of the Russian European Center for Economic Policy.

One of the unrealistic assumptions according to center is inflation, which is officially assumed to be 30 percent in 1999. The center predicts that if current policy is continued, inflation should be somewhere above 130 percent, the exact figure depending on the amount of money printed and exchange rate devaluation during 1999.

The Russian experts also say the demand for locally produced Russian goods had sharply risen as imports had become not affordable for a large part of the population.

“This occasion for Russian production should not be spoiled by driving functioning businesses and companies out of the market by taxing and regulating them to death,” noted the experts.

The center’s experts are also against state investments in special industries, as they believe it will be very counterproductive due to corruption and connections.

“Russia is in a difficult, but potentially hopeful situation,” the specialists said.

The merger of Finnish furniture companies Asko and Sotka, which was concluded last week, left the Estonian furniture market feeling cool and collected.

The two companies are big players on the Estonian market, but Antti Narhinsalo, manager at Sotka’s Estonian subsidiary, did not predict major shifts in market shares.

“The merger of these companies will not bring along any big changes in the near future. The trademarks will not change either. Possible changes are inside the company, but the clients will not feel that at once,” he said.

After the merger, the two companies will take 40 percent of the market, but Narhinsalo said he is not sure this is the top position.

The Finnish companies’ turnover is said to match that of the Estonian furniture company Tallinna Mooblimaja.

Even if the merged company will have the largest market share, Tallinna Mooblimaja’s management said it can beat the new competitors with price.

“Asko’s prices are relatively high, but there is no difference between the prices of the local furniture companies compared to Sotka,” said Narhinsalo.

The Finnish and Estonian companies can, however, compete on the quality level.

Narhinsalo said the quality of Estonian furniture is good, and Sotka has been cooperating with local producers for nine years selling Estonian furniture abroad.

The turnover of Asko’s parent company is about 1.6 billion kroons ($114 million) and Sotka’s is 1 billion kroons. Together, they make about 28 percent of the Finnish furniture market.

The stocks of the merged company will probably be listed on the stock exchange in five years, since this was one of the objectives of the owner.

Following a high increase in advertising turnover in 1996, the advertising boom is gradually slowing down, and Estonian companies predict smaller revenues this year.

The research conducted by BMF Gallup Media shows that in 1996 the advertising turnover increase was 45 percent, but last year it lowered to 26 percent.

Many say this slowdown is the result of stagnation in the economy, while some believe the advertising market has been hyperinflated and is actually shrinking to its normal size now.

“The advertising market has grown faster than the economy. This cannot last long. It should not grow much faster,” said Kaido Raamat, commercial director at the Aripaev business newspaper which mostly sells business-to-business advertising.

“We hoped to earn more, but the turnover did not increase much compared to 1997,” he said. “We are planning for the same amount this year.”

Ulle Kink from the Artmiks advertising agency said the advertising turnover is small because the target group is small. In 1998, the advertising volume per capita was only 490 kroons which was two times less than the average in Europe.

The Gallup Media’s research gives a breakdown of the Estonian advertising market in 1998. Newspapers had 47 percent of the market, followed by TV with 26 percent and magazines with 12 percent. Radio jingles took up 10 percent of the market, and outdoor stands and billboards had 6 percent.

The most advertised product was home hygiene (Procter & Gamble) on TV, mobile communications (Eesti Mobiiltelefon) in the print media, newspapers (Postimees) on radio, and mobile communications and drinks (Saku brewery) in outdoor advertising.

Procter & Gamble has been the top advertiser for the last three years, and it is also the top advertiser on Latvian and Lithuanian TV. The top advertisers in the print media in the other Baltic states are Varner Baltija in Latvia and Omnitel in Lithuania.

According to the Gallup Media research, companies make most of their turnover in the last quarter of the year, and there is a decrease at the beginning of the year.

According to Raamat, the decrease in advertising turnover at the beginning of the year is caused by the general slowdown in the economy after the Christmas season, which is followed by a rise in spring.

Advertising agencies will, however, enjoy some additional revenues before the March 7 election from various election campaigns.

The Finnish clothing company P.T.A. will acquire a large stake in one of the biggest Estonian clothing manufacturers, Klementi, their long-time business partner.

Finland’s leading clothing company, the P.T.A. Group, signed a contract with Optiva Bank Jan. 28, according to which the company will buy a 43 percent holding in Klementi from Fine Holding, a subsidiary of Optiva Bank.

The deal will open up new growth opportunities for both companies.

“This will guarantee a supply to the Finnish partners and it will also give them an opportunity to expand to new markets,” said Madis Vooras, managing director of Klementi.

Vooras added that the strategic investor would give Klementi stability since speculators had been buying and selling the stock, making any long term investments and strategies difficult.

“A strategic investor will also make our company stronger, as the ownership was very unclear before the deal,” said Vooras, who does not see any automatic changes in the company and forecasts normal development for next few years.

Kari Mattsson, from the P.T.A. Group, agreed that there would be few changes in the near future and said that the partnership was a natural fit.

“There will be no strategic changes in the company in the short run perspective. The management will continue. We can support them in marketing and vice versa. Klementi is well know in the Baltics and P.T.A. has an extremely well established trademark in Finland and Sweden,” said Mattsson.

P.T.A. is a fashion manufacturer located in Kuopio, the eastern part of Finland, with a sales of about $32 million last year.

The P.T.A. Group has been a client of Klementi since 1991. Klementi supplies the P.T.A. Group with clothing accessories. According to Vooras, Klementi’s growth and development owes a lot to their cooperation with the P.T.A. Group, one of its biggest clients, and as a result of the transaction the connections will tighten further.

At the same time, Klementi will continue producing and marketing its products in the Baltic countries and Scandinavia under the same trademark.

Vooras said people in the Baltics and Finland are choosing the products of Klementi and its competitors Baltika and Virulane mostly on the basis of trademark and not price. Klementi’s trademark is not widely known on the markets of the developed countries.

There are also lots of foreign competitors for Klementi as the market is open to all importers, says Vooras.

In 1997, the company earned a 5 million kroon ($371,000) profit on a 98 million kroon turnover. Its management has predicted a 125 million kroon turnover for 1998.